Why is Ryanair taking over the ‘new Niki’?

Ryanair looks to increase its presence in Germany and Austria as it puts forward a plan to buy 75% of Laudamotion.

Ryanair has agreed to take a 24.9% stake in Niki Lauda’s new Austrian carrier Laudamotion, with a plan to raise that to 75% “as soon as possible”, as it looks to increase its presence in Germany and Austria.

The move, which depends on EU Competition approval, could cost under €50 million for the 75% stake but would also include an additional €50 million for start-up and first-year operating costs.

The deal would also involve wet-leasing six aircraft to Laudamotion for its summer schedules.

Niki Lauda will chair the board and manage the “implementation of his strategy to build a successful Austrian low fares airline,” Ryanair says, while the Irish carrier provides management support.

Lauda says he is “thrilled that in the partnership with Ryanair, Laudamotion will be able to establish itself as a strong competitor and grow quickly and sustainably”.

Ryanair chief Michael O’Leary quipped that “with access to the Ryanair fleet and financial resources, Laudamotion will now grow more rapidly, as it seeks to compete in a market which is dominated by Lufthansa’s high airfares with its Swiss and Austrian subsidiaries.”

Laudamotion’s fleet of A320s acquired from Niki, Lauda’s previous leisure carrier that was part of the bankrupt airline Air Berlin, is not aligned with Ryanair’s all-Boeing fleet.

Reasons why
Ryanair’s move appears to be out of character for a company focussed on organic growth, Forbes writes. It did not take part in the bidding process for Air Berlin’s assets and also recently abandoned efforts to buy part of insolvent Alitalia.

Ryanair seems more interested in buying up dying airlines’ assets, such as planes, pilots and landing slots, rather than supporting them through investment.

So rather than accepting O’Leary’s reason for the purchase, that “The Laudamotion AOC will support a fleet of Airbus aircraft, which is something we have hoped to develop within the Ryanair Group for some years,” Forbes thinks other factors are more likely.

These include Lauda’s celebrity and local expertise, which could come in useful as Ryanair seeks to gain a better position in the German-speaking world.

Ryanair has just 7.7% of the German market’s European routes by seating capacity, compared to Lufthansa Group’s 58.4% market share. The new acquisition gives O’Leary and Ryanair a chance to take on Lufthansa’s dominant brand, especially as both Lauda and O’Leary both have issues with Lufthansa.